Under absorption costing,fixed manufacturing overhead costs appear on two places on the income statement that include ________ and ________.
A) usage variance for fixed overhead costs; cost of goods sold
B) production volume variance; cost of goods sold
C) efficiency variance for fixed overhead costs; production volume variance
D) efficiency variance for fixed overhead costs; cost of goods sold

Question

Quizplus · Accepted Answer

Under absorption costing, fixed manufacturing overhead costs appear on two places on the income statement that include the production volume variance and the cost of goods sold. The production volume variance reflects the difference between the actual level of production and the budgeted level of production, while the cost of goods sold includes all variable manufacturing costs and a portion of fixed manufacturing overhead costs that are included in the product cost. Therefore, choice B is the correct answer. Choice A is incorrect because there is no usage variance for fixed overhead costs under absorption costing. Choice C is incorrect because the efficiency variance for fixed overhead costs is not included in the income statement under absorption costing. Choice D is incorrect because the efficiency variance for fixed overhead costs is not included in the cost of goods sold under absorption costing.

Under Absorption Costing,fixed Manufacturing Overhead Costs Appear on Two Places